The article analyzes the evolving global trade landscape, characterized by geopolitical shifts, supply chain disruptions, and the rise of economic statecraft. It highlights how trade is increasingly influenced by national security concerns and political stability, moving beyond purely economic considerations. The author discusses the fragmentation of global trade into blocs and the weaponization of economic tools. India's strategy, termed 'economic statecraft 2.0', aims to leverage its economic power for strategic objectives, focusing on resilient supply chains, diversified markets, and technological self-reliance. The piece emphasizes the need for India to adapt to this new global order, balancing economic growth with strategic autonomy.
- Global trade is undergoing significant transformation, driven by geopolitical shifts and national security concerns.
- Supply chains are becoming more localized and resilient, moving away from hyper-globalization.
- Economic statecraft involves using economic tools for strategic and political objectives, leading to trade fragmentation and weaponization.
Union Minister for Defence Rajnath Singh laid the foundation stone for the Advanced Medium Combat Aircraft (AMCA) project in Puttaparthi, Sri Sathya Sai district of Andhra Pradesh. This project focuses on developing fifth-generation stealth fighter aircraft and advanced flight testing systems. The Centre has announced investments of nearly ₹15,000 crore for aircraft integration and an advanced flight testing centre at Puttaparthi. Rajnath Singh highlighted Andhra Pradesh's central role in India's next-generation defence manufacturing ecosystem.
- Defence Minister Rajnath Singh inaugurated the Advanced Medium Combat Aircraft (AMCA) project in Puttaparthi, Andhra Pradesh.
- The project is dedicated to developing fifth-generation stealth fighter aircraft and advanced flight testing systems.
- The Centre has committed significant investments for aircraft integration and an advanced flight testing centre.
India's merchandise exports increased by nearly 14% to $43.6 billion in April 2026, despite significant trade headwinds from the West Asia crisis. This growth is attributed to rising prices and Indian exporters' efforts to diversify markets, according to Commerce Secretary Rajesh Agrawal. The overall trade deficit, including merchandise and services, fell 30% to $7.8 billion in April 2026. Exports to countries like Tanzania, Sri Lanka, Singapore, Bangladesh, and Vietnam saw strong growth, while exports to the West Asia region declined by 28%. Merchandise imports from West Asia also fell by 31.6%.
- India's merchandise exports recorded a significant increase in April 2026, reaching $43.6 billion.
- The growth occurred despite challenges posed by the West Asia crisis, driven by price increases and market diversification.
- The overall trade deficit for April 2026, combining merchandise and services, decreased by 30% to $7.8 billion.
Petrol and diesel prices were hiked by ₹3 per litre across all variants, marking the first major increase in over four years. This move aims to help state-run oil marketing companies (OMCs) stem losses caused by global price and supply pressures due to the West Asia war. The price of regular petrol in Delhi is now ₹97.77 a litre, and diesel is ₹90.67 a litre. CNG prices also increased by ₹2 a kg. The Centre also imposed a windfall gains tax of ₹3 a litre on petrol exports, while reducing the levy on diesel and aviation turbine fuel to ₹16.5 a litre, effective Saturday. Experts suggest a larger hike is needed to cover OMCs' under-recoveries fully.
- Petrol and diesel prices have been increased by ₹3 per litre, the first significant hike in over four years.
- The hike aims to mitigate losses incurred by state-run Oil Marketing Companies due to global price and supply pressures.
- The Centre also imposed a windfall gains tax of ₹3 per litre on petrol exports and adjusted levies on diesel and aviation turbine fuel.
U.S. President Donald Trump concluded his China visit, stating that both nations agreed on "fantastic trade deals" and "settled a lot of problems." Chinese President Xi Jinping affirmed important common understandings on stable economic and trade ties, expanding cooperation, and addressing mutual concerns. Trump referred to the two countries as "G2," a term not officially endorsed by China or favored by other major powers like India. The visit included a ceremonial reception and private talks, with agreements on China purchasing 200 Boeing aircraft and increasing soybean imports, and resuming U.S. beef imports.
- U.S. President Donald Trump concluded his visit to China, announcing significant progress on trade and problem resolution.
- Chinese President Xi Jinping highlighted common understandings on economic stability and expanded cooperation.
- Trump's use of the term "G2" for the U.S. and China is not officially endorsed by Beijing and is viewed unfavorably by other major powers.
India's economy is grappling with significant challenges, including rising inflation, capital flight, and a widening current account deficit, exacerbated by global uncertainties and high oil prices. The Prime Minister's call to reduce gold and petrol consumption underscores the severity of the external front. The rupee has depreciated, and capital outflows have occurred even without foreign interest rate hikes, signaling underlying vulnerabilities. If global interest rates rise, India's external account will face further stress. The editorial argues that moral suasion is insufficient, and the RBI's past interventions and government's import duties on gold have not resolved the core issues, indicating the economy is not yet stable.
- India's economy is under pressure from rising inflation, capital flight, and a widening current account deficit.
- Global uncertainties and elevated oil prices are significant contributors to the current economic challenges.
- The rupee has depreciated, and capital outflows are occurring even without foreign interest rate hikes, highlighting underlying vulnerabilities.
India's wholesale inflation (WPI) surged to 8.3% in April 2026, marking its highest level in 3.5 years. This significant increase is primarily attributed to the impact of the West Asia crisis, leading to sharp rises in crude oil and natural gas prices, which saw a 67.2% inflation in April. The fuel and power category also experienced a substantial rise to 24.7%. Experts warn that this elevated wholesale inflation could soon translate into higher retail prices for consumers and potentially squeeze the profit margins of manufacturing and industrial companies if costs cannot be fully passed on.
- India's Wholesale Price Index (WPI) inflation rose sharply to 8.3% in April 2026, the highest in 3.5 years.
- The primary driver for this surge is the West Asia crisis, which has significantly increased crude oil and natural gas prices.
- Inflation in the crude oil and natural gas sectors reached a 46-month high of 67.2% in April.
The PLFS 2025 report indicates positive trends in India's labour market, with increased Labour Force Participation Rate (LFPR), Workforce Participation Rate (WPR), and a decline in unemployment. Improvements are seen in women's participation, especially in rural areas, and a shift towards regular wage and salaried employment, leading to higher earnings for women. However, significant challenges persist, including gaps in education-to-employment transition, limited access to formal skills training, sustained low women's workforce participation due to unpaid work, and a large NEET (Not in Education, Employment, or Training) group among youth.
- The PLFS 2025 report highlights an increase in India's Labour Force Participation Rate and a decrease in unemployment.
- There is a positive shift towards formal salaried employment and improved earnings for women, particularly in regular wage work.
- Significant challenges include the gap between graduates and employment, with only 2.8 million out of 5 million graduates securing jobs annually.
India's economy faces significant capital outflows and rupee depreciation, exacerbated by rising oil prices and global uncertainty, particularly from the Persian Gulf conflict. This situation is concerning as it occurs even without interest rate hikes in the U.S. and U.K., suggesting underlying vulnerabilities. The Prime Minister's call to reduce gold and petrol consumption highlights the external front's challenges, including a widening current account deficit. If foreign central banks raise interest rates, India's external account could face further stress, necessitating policy responses beyond moral suasion.
- India is experiencing significant capital outflows and rupee depreciation due to global uncertainties and rising oil prices.
- The current economic stress is notable because it precedes any interest rate hikes by major foreign central banks.
- A widening current account deficit and potential future interest rate increases abroad could further strain India's external account.
Former Ambassador T.S. Tirumurti emphasized the necessity for India to formulate a comprehensive regional policy for West Asia, moving beyond a country-specific approach. He highlighted the region's critical importance for India's energy security, trade, and the welfare of its diaspora. Tirumurti advocated for a "multi-vector" and "multi-aligned" foreign policy, allowing India to engage with all regional players without taking sides, especially amidst the ongoing West Asia crisis. He stressed that India's approach should prioritize its own strategic autonomy and national interests, leveraging its historical ties and economic influence to contribute to regional stability and address challenges like terrorism and maritime security.
- Former Ambassador T.S. Tirumurti urged India to develop a comprehensive regional policy for West Asia, rather than a country-specific one.
- He emphasized the region's vital importance for India's energy security, trade, and the welfare of its diaspora.
- India should adopt a "multi-vector" and "multi-aligned" foreign policy, engaging with all regional players without bias.
Experts at a discussion on "Economic Disruptions in Sri Lanka" urged India to learn from Sri Lanka's experience with fertilizer supply chain disruptions. Dr. Ramya S. Moorthy highlighted how the sudden shift to organic farming, coupled with global supply chain issues, led to a severe food crisis in Sri Lanka. The panel emphasized the need for India to diversify its fertilizer sources, invest in domestic production, and maintain strategic reserves to ensure food security. They also discussed the broader implications of geopolitical events on supply chains and the importance of prudent management of external sectors to avoid similar crises, especially concerning essential imports like crude oil and fertilizers.
- Experts advised India to learn from Sri Lanka's fertilizer crisis to bolster its own supply chain resilience.
- Sri Lanka's sudden shift to organic farming and global supply chain disruptions caused a severe food crisis.
- India should diversify fertilizer sources, boost domestic production, and maintain strategic reserves for food security.
Experts at a discussion on "India's Diplomacy in West Asia" urged India to step into the geopolitical vacuum created by the U.S.'s reduced engagement in the region. Former Ambassador T.S. Tirumurti emphasized that India's policy in West Asia should be "multi-vector" and "multi-aligned," focusing on its own interests rather than choosing sides. He highlighted the region's importance for India's energy security, trade, and diaspora. The panel also discussed the challenges posed by the ongoing West Asia crisis and the need for India to play a more proactive role in ensuring regional stability, leveraging its historical ties and economic influence. The consensus was that India's approach should be pragmatic and focused on its strategic autonomy.
- Experts advocate for India to fill the geopolitical vacuum left by the U.S. in West Asia.
- Former Ambassador T.S. Tirumurti stressed a "multi-vector" and "multi-aligned" policy for India in the region.
- West Asia is crucial for India's energy security, trade, and large diaspora.
The India-Sri Lanka Business Forum, organized by CII and the Ceylon Chamber of Commerce, has identified six key areas for bilateral cooperation: ports, transport and logistics, pharmaceuticals, online payments, travel, and the existing Free Trade Agreement (FTA). These sectors offer immediate investment and trade opportunities, aiming to strengthen economic engagement and explore new avenues. Specific proposals include joint ventures for warehousing, sourcing generic drugs from India's pharma clusters, and exploring cross-border digital payment links. The forum also discussed reviewing the existing FTA to add more products like pharmaceutical raw materials and logistics equipment, with a joint working group on trade facilitation scheduled to meet in August 2026.
- The India-Sri Lanka Business Forum identified six key sectors for bilateral cooperation: logistics, pharma, online payments, travel, ports, and FTA review.
- The initiative aims to strengthen economic engagement and explore new trade and investment opportunities between the two nations.
- Specific proposals include joint ventures in warehousing, sourcing generic drugs, and implementing UPI-like digital payment systems.
The Union Cabinet has approved a ₹37,500-crore package to promote coal gasification, a sustainable alternate mining method. This initiative aims to convert coal into syngas or synthetic gas, which can then be used to produce downstream products like urea, methanol, and ammonia, thereby reducing India's import bill for these key products. India's import bill for such products was approximately ₹2.77 lakh crore in FY2025. The scheme targets gasifying 75 million tonnes of coal and lignite by 2030, offering financial incentives up to ₹9,000 crore per project and extending coal linkage tenure to 30 years to encourage investment.
- The Union Cabinet approved a ₹37,500-crore package to promote coal gasification.
- The scheme aims to convert coal into syngas for producing downstream products like urea and methanol, reducing import dependence.
- India's import bill for these products was ₹2.77 lakh crore in FY2025, highlighting the strategic importance of this initiative.
China's economic strength has dramatically grown to rival that of the U.S., as evidenced by various economic indicators. Its GDP, once 15 times smaller than the U.S. in 1990, is projected to be only 1.5 times smaller by 2025. China has maintained a strong GDP growth rate and significantly higher labour productivity growth compared to the U.S. China has also increased its share in global exports across key sectors and surpassed the U.S. in R&D expenditure by 2024. This economic rise has translated into increased diplomatic influence, with China becoming the world's largest official creditor in 2023 and ranking higher than the U.S. in diplomatic influence and economic relations for 2025.
- China's GDP is projected to be only 1.5 times smaller than the U.S. by 2025, a significant reduction from 15 times in 1990.
- China consistently shows higher GDP growth rates and labour productivity growth compared to the U.S.
- China has increased its global export share in sectors like electronics and minerals and surpassed the U.S. in R&D expenditure by 2024.
The Cabinet Committee on Economic Affairs announced an increase in the Minimum Support Price (MSP) for kharif crops for the 2026-27 season. The MSP for common paddy has been raised by ₹72 per quintal to ₹2,441, with A-grade paddy at ₹2,461 per quintal. Union Minister Ashwini Vaishnaw stated that the revised MSPs would ensure returns of about 50% over the cost of production. However, farmer organizations have criticized the new rates, arguing they do not adequately account for the potential "disastrous impact" of the India-U.S. trade deal and other free trade agreements on the agriculture sector.
- The Cabinet Committee on Economic Affairs approved increased MSPs for kharif crops for the 2026-27 season.
- MSP for common paddy increased by ₹72 per quintal to ₹2,441.
- The government aims to ensure a 50% return over the cost of production with the revised MSPs.
The Indian government has doubled the effective tax on gold and silver imports from 9.2% to 18.4%, effective Wednesday. This decision, made through two notifications, aims to address India's current account deficit (CAD) exacerbated by the West Asia crisis and protect foreign exchange reserves. Prime Minister Modi had previously urged the public to reduce gold purchases. Industry experts, however, criticize the move as "retrograde" and "blunt," predicting it will likely increase smuggling rather than reduce demand, given gold's cultural significance in India. They also warn of negative impacts on employment and exports in the jewellery sector.
- The effective tax on gold and silver imports has been doubled from 9.2% to 18.4%.
- The government's rationale is to manage the current account deficit (CAD) and safeguard foreign exchange reserves amidst global volatility.
- Industry players and experts believe the hike is a "retrograde" decision that will likely boost smuggling and negatively affect the domestic jewellery sector.
Commerce Minister Piyush Goyal announced that the India-Oman Comprehensive Economic Partnership Agreement (CEPA) is likely to be implemented by June 1, 2026, following a productive meeting with the Omani negotiating team. This agreement, signed in December 2025, aims to strengthen bilateral economic cooperation, connectivity, and trade flows. However, negotiations for the India-Chile Free Trade Agreement have encountered hurdles due to significant differences in the sizes of their economies and opportunities. Goyal indicated that innovative solutions are being sought, contingent on critical minerals and concessions from Chile.
- The India-Oman Comprehensive Economic Partnership Agreement (CEPA) is expected to be implemented by June 1, 2026.
- Commerce Minister Piyush Goyal confirmed this after a meeting with the Omani team.
- The CEPA aims to strengthen India-Oman economic cooperation, connectivity, and trade flows.
Union Minister for New and Renewable Energy (MNRE), Prahlad Joshi, announced that a new policy linking fiscal incentives to renewable energy adoption has been accepted by both the Power and Finance ministries. This policy aims to encourage States to sign Power Purchase Agreements (PPAs) for renewable energy. Joshi emphasized the government's serious efforts to address current issues in renewable energy generation, including grid and transmission constraints. Despite a 7% decline in global renewable investments, India has seen strong investment flows in the sector, indicating its commitment to affordable and reliable green energy.
- A new policy linking fiscal incentives to renewable energy adoption has been accepted by Power and Finance ministries.
- The policy aims to encourage States to sign Power Purchase Agreements (PPAs) for renewable energy.
- The government is actively working to resolve issues related to grid and transmission constraints in renewable energy generation.
Chief Economic Advisor (CEA) V. Anantha Nageswaran highlighted a "substantial" gap between the promises of Free Trade Agreements (FTAs) and the realities of regulatory frameworks. He stated that FTAs create value only upon implementation, not just signing. India has entered into nine trade agreements in the last five years, representing a significant burst of trade diplomacy aimed at diversifying economic relationships and reducing dependence on single markets. However, the CEA stressed the need to address regulatory standards and procedural barriers on both sides with urgency to fully realize the benefits of these agreements.
- CEA V. Anantha Nageswaran noted a significant gap between FTA promises and actual regulatory permissions.
- FTAs generate value only when effectively implemented, not merely upon signing.
- India has signed nine trade agreements in the last five years, aiming to diversify its economic footprint.
A paper in BMJ Global Health argues that structural adjustment programmes (SAPs) imposed by the IMF and World Bank in the 1980s caused severe economic and social damage to countries in the global South. These SAPs, triggered by debt crises and U.S. interest rate hikes, mandated austerity, privatization, and deregulation, reversing post-independence development gains. This led to stagnant incomes, weak public health systems, and increased poverty, with the global South losing an estimated $480 billion annually in potential national income. The authors advocate for reparations and systemic changes, including abolishing SAP conditions and democratizing these institutions, or replacing them with alternatives like the BRICS New Development Bank.
- Structural Adjustment Programmes (SAPs) by IMF and World Bank in the 1980s significantly harmed the global South.
- SAPs mandated austerity, privatization, and deregulation, reversing post-independence development.
- These policies led to stagnant incomes, weak public health systems, and increased poverty in affected regions.
Union Petroleum Minister Hardeep Singh Puri indicated a potential fuel price hike, citing mounting losses for oil-marketing companies (OMCs) due to the prolonged West Asia crisis. OMCs are currently bleeding losses by holding petrol, diesel, and LPG prices firm, with under-recoveries projected to reach up to ₹2 lakh crore this quarter. Puri emphasized that one quarter of losses could wipe out net profits from the previous financial year. He reassured consumers about adequate retail fuel supply but urged diligent use of fuel, echoing PM Modi's call for austerity.
- Union Petroleum Minister Hardeep Singh Puri suggested a potential fuel price hike due to OMCs' mounting losses.
- OMCs are incurring significant under-recoveries by keeping petrol, diesel, and LPG prices firm amidst the West Asia crisis.
- Under-recoveries for OMCs are estimated to reach up to ₹2 lakh crore this quarter.
India's retail inflation, measured by the Consumer Price Index (CPI), accelerated to a 13-month high of 3.5% in April 2026, slightly below economists' expectations. This increase was primarily driven by higher food inflation, which climbed to 4% from 3.7% in March, and rising prices in the restaurant and accommodation services sector, up to 4.2% from 2.9%. The price surge reflects the passing on of higher fuel costs to consumers and geopolitical disruptions, alongside the impact of El Nino, clouding the economic outlook despite an ease in transport sector inflation.
- Retail inflation in India reached a 13-month high of 3.5% in April 2026.
- The primary drivers for this inflation were increased food prices and higher costs in the restaurant and accommodation services sector.
- Food and beverages inflation rose to 4% in April from 3.7% in March.
The Union government has notified that the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) [VB-G RAM G] will replace the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) from July 1, repealing all existing rules and guidelines. The new scheme, passed without pre-legislative consultations, increases the statutory employment guarantee from 100 to 125 days annually. However, crucial details like objective parameters for deciding normative budgets and the 60:40 Centre-State expenditure ratio (compared to 100% Centre wage bill under MGNREGA) remain unclear. Concerns also exist regarding e-KYC completion for workers and a new blackout period clause, which could reduce workers' bargaining power.
- The Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) will replace MGNREGA from July 1.
- The new legislation increases the statutory employment guarantee from 100 to 125 days per financial year.
- A key change is the shift from 100% Central funding for wages under MGNREGA to a 60:40 Centre-State expenditure ratio for most States.